Canada is getting set to roll out a tax credit to support fossil companies’ investments in carbon capture and storage (CCS), Natural Resources Minister Jonathan Wilkinson confirmed in a telephone interview with Bloomberg News this week.
The report follows close on the heels of Alberta’s announcement that it will spend C$30 million to make CCS technology “ready to go” once the federal program rolls out.
“The tax incentive would be like what’s offered in the U.S.,” Bloomberg reports, and will likely be included in this year’s federal budget. “The credit would exclude carbon capture that’s used to boost oil production, called enhanced oil recovery.”
To date, 81% of the carbon captured through CCS has indeed been used for enhanced oil recovery (EOR), which involves injecting carbon dioxide underground to force more petroleum to the surface.
In an exclusive Energy Mix interview last year, an analyst warned that a Canadian incentive modelled on the Section 45Q tax credit [pdf] in the United States would drive up greenhouse gas emissions while giving investors a false sense that they were backing a climate solution.
“The oil industry and the coal industry see this as a way to keep their industries going,” said David Schlissel, a Massachusetts-based consultant associated with the Institute for Energy Economics and Financial Analysis. “So they green-wrap it as a way to save produced CO2.” But the economics of those failing power plants, coupled with a volume-based tax credit that pays up to US$50 per tonne for any carbon an operator can capture, turn Section 45Q into an incentive to burn and emit more carbon, not less.
The Alberta program, announced last Friday, aims to fund “the technical and engineering know-how to make sure as many projects as possible are ready to go when the federal plan is released,” the Globe and Mail writes. “The province—through Emissions Reduction Alberta, an arm’s-length agency—will spend $30 million on research and development that can help clear some of the engineering and design hurdles facing sectors that haven’t yet deployed the technology.”
Each grant will cover 50% of a company’s research and development costs, to a maximum of $7.5 million, the Globe says.
Alberta Environment Minister Jason Nixon said policies flowing from the upcoming federal climate plan, aimed at cutting the country’s greenhouse gas emissions 40 to 45% by 2030, “are going to have an impact way beyond oil and gas.” He identified concrete and fertilizer production as industries with technical issues to address before they can put CCS to use.
“We’d like to see a pool of solid projects ready to go,” Nixon told the Globe. “This is very focused on the technical side, trying to overcome some of the hurdles that are still in place, particularly as you move this technology into some of the other areas that have not used it in the past.”